Zimbabwe’s GDP growth is projected to slightly increase to 1.6% in 2016 from an estimated 1.5% in prior year and the marginal growth is anticipated on expansion in tourism, construction and financial sectors.
The African Development Bank (AfDB) in its 2016 African Economic Outlook report however says poor performance of government revenue against the background of high recurrent expenditures continues to constrain the fiscal space.
“GDP growth declined from 3.8% in 2014 to an estimated 1.5% in 2015 but is projected to slightly increase to 1.6% in 2016. This improvement is due to an anticipated expansion in the tourism, construction and financial sectors,” it said.
The reports says the fiscal space remains constrained due to underperformance of domestic revenues, increase in public expenditures, depressed exports, limited foreign direct investment (FDI) and other capital inflows into the country.
“This has undermined development expenditure and social services provision in both urban and rural areas, exacerbating the incidence of poverty. Financing for urban development, both housing and transport, has been negatively affected.”
AfDB says the depreciation of the South African rand against the US dollar (USD) has resulted in a decline in prices of imports from South Africa.
This trend, along with weak domestic demand, tight liquidity conditions and declines in crude oil and global food prices, resulted in negative inflation which resulted in the annual average inflation declining from -0.2% in 2014 to -2% in 2015.
Inflation is projected to remain negative in 2016 and 2017. The report says the country remains in debt distress, exacerbated by the lack of a diversified export base and declining terms of trade that makes it difficult for the country to adjust to changing world demand for tradable goods.
AfDB says these structural weaknesses have constrained the country’s ability to generate high and sustainable growth that is necessary to mitigate the debt distress.
“Moreover, the external position is projected to remain under severe pressure in the medium term on account of poor export and import performance on the back of an appreciating US dollar.
“The Public Debt Management Act, passed into law in September 2015, is expected to strengthen the legal and institutional framework for debt management. “
According to the World Bank report, Doing Business 2016, the doing business environment improved with the country moving up 16 places to 155 out of 189 countries.
According to AfDB, Zimbabwe has experienced reverse urbanisation in recent years as economic slowdown continues to hamper opportunities in cities.